saunafool (95.51)

The Dumbest Activity in the World

2

I was thinking about the housing bubble today. I've always thought it was B.S. Ask any of my friends, like TMFBent for example. They will tell you I've thought housing was in an overpriced speculative frenzy for the past 5 years (maybe I was early). Of course, I was living in San Francisco at the time, and if prices there fell by 50% it would still be unaffordable for average folk.

Anyway, think about this for a moment: The bulk of the growth in the American economy in the past 6 years has been based on homebuilding. But, not the base rate of homebuilding; rather a huge spike in homebuilding driven by speculation--i.e. the 23% of sales in 2005 that were 2nd home purchases or "investments."

Can you think of a less productive activity for the economy compared to "building homes that no one lives in?" It's hard to do.

It's not that unproductive. If the government would let the market correct itself, the price would drop until enough people could afford to buy them and the homes would be occupied. Unfortunately, that would negatively impact the economy, and especially the profits of financial institutions.

Just think about it, though. Wall Street, banks, and other large corporations, racking up big losses just to make homes cheap for those who couldn't otherwise afford them. Far from unproductive, it's kinda heartwarming, isn't it?

Ahh, but that's where my last two blogs on the bailout come in. Not only did we build a bunch of houses that no one lives in, the Fed is busy devaluing the dollar just to prop up the prices of these huge wastes of boards and bricks.

I rather believe that taking a bunch of inocent mortgages, (many of whom were given to people who never should have been given a mortgage in the first place, especially one that they have no hope of repaying), pooling them together into a big security, loading it up with debt, tranching and retranching it until nobody knows what it contains, paying your lacky ratings agencies to give it a AAA rating and then selling them to an unsuspecting public seems to me to be the most worthless activity someone could engage in, (especially to also pay them millions to do so). Just my opinion.